Brussels Can't Monitor 27 Budgets

The European Union's Stability and Growth Pact was originally intended to curtail free-rider behavior, where member states would benefit from the single currency without paying the costs—i.e. controlling their budgets. Now the Pact is being redesigned to address sovereign-debt sustainability. But unless budget rules are overseen closer to home instead of in Brussels, fiscal discipline will remain wobbly.

In the early years, compliance with the Pact's budget-deficit limit entailed relatively little effort, given the favorable...